Many people have an interest in learning about real estate investing and maybe you are one of them. It is one of the most secure ways to gaining wealth and cash flow or liquidity. Observers marvel at the wealth created and displayed by many of those who have had great success in the industry. Often, you may wonder what enables or helps individuals to be successful in real estate investing. What makes the difference between those who have succeeded in buying and selling or renting large numbers of property and those who have not yet been able to acquire a home of their own versus investment properties? Frequently I’m asked how you did and/or your company gets started investing in real estate? Here is my story:
In May 1979, I bought a nice 3 bedroom single family that I thought was a mansion at that time to house my family while serving in the military at Nellis, NV. About a year later, I wanted to move closer to the base and I sold the house and was very excited about the profit I made after one year. As a matter of fact, my military wage was about $1000/month and when I received the check from the closing, I thought I could retire. It was at that point I realized I started to fall in love with the real estate business. I continued to own several properties in Las Vegas overtime all being sold for more than I spent to acquire them. Of course, making money and keeping it require two different skill sets and at that time in my life, I did not have the money management skill set so like many others, you can imagine what happened to the dollars I made. Let us consider a few steps that could help anyone with the desire to become a real estate investor.
I started with a plan to purchase a home which I could afford to accommodate my family and the intent to relocate whenever the family grew from three to four which obviously did not take long. It is therefore essential that you develop a plan to acquire and dispose of or use your acquisitions within the plan you develop. I suggest that although you can invest in real estate anywhere that it makes DOLLARS and CENTS to do so. It is probably best that you start within your immediate home area with which you are familiar. This is one way to eliminate some of the fear and anxiety that individuals may experience which can prevent them from getting started on a pass of successful real estate investing. Sometimes, another barrier to getting started is knowledge about the industry and/or the investing process. Although there is a great deal to learn, it can be accomplished in small portions as you work through the development of your real estate investing plan.
Real estate investing is a business. In order to create a new business, sometimes individuals want to put all the pieces in place and get it perfect before getting started. It is helpful to remember the perfect plans do not exist and cannot be created because we’re all imperfect human beings and therefore lack the ability to create anything perfect. It is best to keep your planning and process within your plans very simple. Like the medical profession, legal profession or that of an engineer, such disciplines have their own technical language which must be studied and understood to perform successfully, the real estate industry has its own technical language with words and formulas that you must know and understand which are relatively easy to comprehend because you will learn with each step of the process.
In this overview, it is not my intent to promote any specific plans or resource pools although I will mention a few that are commonly used and you will be able to expand your resource pool as you progress.
The internet has an abundance of free information, much of which can be validated to help you in getting started. One of my daughters prefers Google as her business partner because she uses it as a tool to research and verify almost anything she does. I have another acquaintance who suggests if you cannot find instructions on how to repair an item or complete a specific task or process on Youtube, it does not exist. You may also have available local libraries and investing groups where you can connect with other light minded individuals and learn as well as share information to meet your needs and share experiences that would benefit others and therein establish a support network for your business.
Up to this point, you have been thinking through the process, now it’s time to start writing out the steps that would make up your plan. How to develop a solid real estate plan?
A firm plan
To develop a solid real estate plan is to eliminate the guess work as much as possible because there’s too much at stake in time, money and energy to guess, learn or make it up as you go. You don’t need an office or a website or business cards or the approval of your best friend or relative to begin, but you do need a plan.
What is your initial investing strategy for your real estate business? It is best to foreclose on one area and master that before attempting expansion. Attempting different directions initially could impede your progress. Are you looking for wholesale tier one, direct business with banks or other institutional activity or tier two other individual investors or individuals who may be selling individual properties or small bundles (1-10 properties or more at a time). Are you looking for distressed properties or opportunities through short sales, pre-foreclosures, probate (divorce or death), fire damaged or floods or seniors who would like to move from independent living into group living arrangement and no longer want the responsibility of home ownership, many of whom as result of their age are not interested or motivated by lots of money, but are more interested in supporting a cause. What is your cause? How are you going to fund or finance real estate opportunities you identify?
What is your investing strategy? Are you looking for wholesale, rehab or rental properties? Are you looking for probate, short sale, pre-foreclosure, fire-damaged, or divorce properties? How are you going to finance deals that come your way? What markets and specific areas are you looking in?
There are at least a dozen core questions that you must answer before you do anything else. You don’t need to know every step you will take on every deal, but you need to have a clear vision for what your real estate goals are. These goals will help you to choose the best team and what properties you will make offers on. Instead of worrying about the minutia of the business, start by developing a plan for how you want to get there.
A solid team
Real estate is a people business. Every transaction requires a working rapport with several individuals to transpire smoothly and working with a good team is in your best interest. Are you looking to build a business with family, friends, or business partners? When we built CT Homes, we did! It’s extremely appealing to be able to divide and conquer responsibility, but make sure before you get in business that every one on board is clear with their goals and responsibilities. Being open and honest with each other about what you’d like to get out of the real estate business and how much time you can put in can save thousands of dollars of your time and effort before you even look at a property.
In assembling your team, find a real estate agent who is investor friendly and is knowledgeable about your target area. They will help you find the properties that match your goals. The clearer you are with your plan, the easier it will be for them to do their job. How many properties are you looking to acquire this year? Can you take on a full gut or adding an addition, or are you just looking for properties that need cosmetic work? These questions will help a real estate agent best help you and your business.
You will also need a good mortgage broker or lender to finance your deals. What you want to do may not be in line with what you are approved for. A good lender knows the best programs for you and can get your deals done as quickly as possible. You can also use private money lenders by building relationships with people looking to lend.
If your strategy is to focus on rehabs and flips, you need the help of a solid contractor. They will have a direct impact on the quality of work and whether or not you stay under budget.
Finding this team before your first deal is not as difficult as it may appear. If you know what you want, a good team will help make it happen.
It is quite possible to fund deals without much, or any, of your own capital. Even though this is the case, you still need some money to get your business started. You don’t need tens of thousands of dollars, but you should have some help to be able to start marketing.
Little things like business cards, investment club fees, updated phones or computers and marketing money is needed. There are many free sites and resources, such as Craigslist, available to help you get started. You can also utilize email campaigns and reach out to friends and family to see if they have any interest in either funding deals or know someone interested in selling.
That being said, you don’t want to get going and immediately run into obstacles. Even if it is a few thousand dollars, you should have some reserves to help you start marketing when you are starting out.
As much as you would like to believe, deals will not just fall into your lap. New investors, in particular, will find this to be even more true.
Real estate is not an “easy” business. It takes tenacity, persistence, discipline, and the will to succeed no matter what. Regardless of how experienced you are, deals take work. This could mean stepping out of your comfort zone and calling 100 new contacts a day. It could mean knocking on every door just to get one new lead. Most new deals typically go to who has the most drive and works the hardest to get them. When you are just getting going, it can be the most frustrating time in the business. There will be days where you are working hard, but not seeing anything for it.
The successful investors are those that fight through those days and commit to work even harder. If you have only one attribute, you must have the drive to succeed. In time, and with the right mindset, everything else will eventually fall in place. Without drive and determination, nothing else matters.
Not everything is going to be perfect in your first couple of months. This doesn’t mean you shouldn’t get started. Every investor in a meeting has been in the same position you are. Those that have been in the business for some time managed to get to where they are by being persistent and fighting through the tough days. The longer you wait to get started, the more difficult it becomes.
Everything that looks good is not necessarily good. Good and or attractive is not necessarily. Analysis will generally show significant flaws or pitfalls. Patience is therefore required to analyze each situation and select the right investment at the right time to yield the best results consistent with a plan. The adage “haste makes waste” is true in real estate at all levels from development to investment. Your plans for real estate investing should therefore allow time for analysis and maturity in order to get the anticipated outcomes. Things do not always go